Women directors and firm performance: Malaysian evidence post policy announcement

Purpose - In 2011, the Malaysian cabinet approved the policy that all board of directors of companies listed on the Bursa Malaysia should consist of 30 per cent women in decision-making positions by the year 2016. The purpose of this paper is to examine the association between the presence of women on the board and firms’ performance following the introduction of the diversity policy. Design/methodology/approach - The analysis uses the information of the top 200 Malaysian public listed companies for the financial year 2011–2013. The multiple regression analysis is used to estimate the relationship between the firm performance (return on assets (ROA)) as the dependent variable and the independent variables. Findings - The results show that during the period under study, the proportion of women directors on board is negatively correlated with ROA. This indicates that the firm performance may not be dependent on the number of women directors on board. However, the results of the study also show that the academic backgrounds of the women board members add some value toward generating better firm performance. Research limitations/implications - A small sample size of only the top 200 public listed companies was utilised. Consequently the outcome may not be generalisable to smaller public companies or private firms. Another limitation is regarding the sample period. Taking only one year before and one year after the policy’s approval may be too short of the period under study and may be too early to study the impact of the policy. Future studies could sample a longer period. Practical implications - The findings encourage public listed companies to appoint women with the necessary qualities as members of the board and not to simply increase the number of women on boards. Originality/value - There is a lack of work on studying women’s effectiveness on board in developing countries, whereby previous work and literature review were predominantly based upon the experience of Western economies. This study, thus, contributes to the rising literature on women board member representation based on the firm performance of the top 200 listed companies in Malaysia.